Overview
This lecture introduces price discrimination, where companies charge different prices for the same product or service, and discusses its occurrence, conditions, and effects.
Uniform Pricing vs. Price Discrimination
- In many stores, all customers pay the same price for a product or service (uniform pricing).
- In many markets, customers pay different prices for the same good or service (price discrimination).
Examples of Price Discrimination
- Airline passengers on the same flight pay different ticket prices.
- A Japanese company sells the same pork at higher prices in Japan versus the US.
- Holiday companies offer the same trip at different prices to various customers.
- European rail companies charge different fares to commuters and students.
- Hotels, airlines, and railways commonly use price discrimination.
Circumstances for Price Discrimination
- Companies seek ways to maximize profits by charging different prices to different customer segments.
- Price discrimination occurs when companies can prevent customers from reselling and can identify groups willing to pay different prices.
Impact of Price Discrimination
- The lecture explores whether price discrimination benefits companies and consumers.
Key Terms & Definitions
- Uniform Pricing — Charging all customers the same price for a product or service.
- Price Discrimination — Charging different prices to different customers for the same product or service.
Action Items / Next Steps
- Review real-world examples of price discrimination in different industries.
- Consider under what conditions price discrimination is possible and its effects on companies and consumers.